Investors are increasingly sensing cracks in the foundation beneath them. This week's approval of a large-scale fiscal package by the Trump administration with promises of tax cuts and boosted military spending has fueled both bulls and pessimists.
The Congressional Budget Office estimates the cost of these initiatives at $4 trillion, and this has not gone unnoticed. Moody's downgraded the US credit rating to Aa1. The market is reacting ambiguously. While the positive momentum from fiscal stimulus remains, it is clashing with growing concerns about public debt and inflationary risks.
Investors are restructuring their portfolios: "defensive" sectors (utilities, healthcare, energy) are under pressure, while tech leaders and consumer stocks are soaring.
Such rotation has not been seen in a long time, and it signals that big money is betting on continued growth, clearly ignoring macroeconomic threats. How long could this fragile euphoria last?
On Friday's premarket, the S&P 500 was trading at 5,839 and the Nasdaq 100 at 21,120, approaching key technical levels. This is where it will be decided: will bulls break through and extend the rally, or is this the final spike before a correction?
Technical picture
At the start of the week, the S&P 500 tested the demand zone of 5,827–5,849 and rebounded toward 5,900–5,930. Twice it touched the 5,870 support level, which now acts as a key barrier for bears.
On Thursday, a bearish attack broke through 5,870 but failed to hold below it, bouncing back to 5,904. Now, hovering just below 5,840, the index is again walking a tightrope. If it falls below 5,827, it opens the path to the 5,785–5,760 zone, which is medium-term support.
However, if buyers manage to pull the price back above 5,870 and break through 5,904, an assault on 5,950 is likely, possibly followed by a push to 6,000.
The Nasdaq 100 is moving in sync. Early this week, we saw a sharp leap from 20,500 to the 21,100–21,200 range. The level of 21,169 has become a pivotal point, acting as both resistance and a springboard for false breakouts.
The current level of 21,120 confirms bulls are trying to stage a comeback. A move above 21,315–21,364 would likely spark a test of 21,500 and beyond. Conversely, a dip below 21,000 increases the chances of a decline to 20,820, followed by a possible slide to 20,650.
What to expect next week
The market has reached a crossroads. From a technical standpoint, it is ready to continue rising but it needs a catalyst. This could be strong inflation or GDP data or simply a lack of negative news.
However, the foundations are groaning louder: fiscal recklessness, strain in the credit market, and a credit downgrade are not just noise. They create a tense backdrop where any disappointment could trigger a wave of profit-taking.
Next week will be essential. Positions should be managed with tight stop-losses and heightened caution. The buy-and-hold era gives way to a market of tactical entries and quick reactions.
Catalysts for the week ahead: rates, inflation, and earnings in focus
The market enters a new five-day stretch, balancing expectations of growth with systemic risks. Key price drivers in the days ahead include:
- US macroeconomic data: inflation and GDPOn Tuesday and Friday, PCE inflation and revised Q1 GDP data will be published. If inflation spikes again, the market may start reassessing the likelihood of a federal rate cut.Similarly, a downward GDP revision would pressure the dollar but could support growth stocks.
- Fed speakersThe Fed is on pause, but for how long? Any shift in tone from the current "too early to cut" messaging could shake the market. A hawkish signal might prompt profit-taking in Nasdaq, while dovish tones could energize a new rally.
- Fiscal outlook: response to Trump's budget packageThe market is still digesting the passed tax-and-spending bill. Bond yields are rising, but the dollar is not. This could change if the US Treasury ramps up debt issuance and Moody's continues to pressure sovereign assets.
- Earnings season: tech giants and retail in focusWhile peak earnings season is behind us, Salesforce, HP, and Best Buy report next week. Retail will be especially scrutinized—how are margins and demand holding up amid high rates and low consumer confidence?
- Geopolitics and oilAny escalation in the Middle East, particularly involving Iran or risks to tanker routes, could rapidly boost volatility via oil and gold. Conversely, a steep drop in oil prices would hit S&P 500 energy companies.
Next week is a mix of macroeconomic releases, Fed commentary, and fallout from the budget plan. The market is not looking for an excuse to fall, but if one emerges, liquidity could vanish quickly. Any news could pull the trigger.Now is the time for selective action.
